New Bill Seeks to Permanently Extend Tax-Free Student Loan Repayment Benefit

New legislation would permanently allow employers to help employees pay off some of their student loans tax-free.

The bipartisan bill introduced July 25 in the U.S. House and Senate, called the Employer Participation in Repayment Act, would permanently enable employers to provide up to $5,250 of annual tax-free, student loan repayment educational assistance as a voluntary benefit to their employees under IRS Section 127. The legislation was introduced by Sen. Mark Warner, D-Va.; Sen. John Thune, R-S.D.; Rep. Scott Peters, D-Calif.; and Rep. Nicole Malliotakis, R-N.Y.

This legislation would permanently extend a provision in the Consolidated Appropriations Act signed into law in December 2021 as part of pandemic relief efforts that allows employers to contribute up to $5,250 per employee annually toward student loan assistance without increasing the employee’s gross taxable income. It’s set to expire on Jan. 1, 2026.

“Over the last four years, this program has been a huge success—employers have helped pay off thousands of employees’ loans, and it gave employers a tool to compete for the best talent,” Peters said in a statement. “This public-private collaboration has proven itself as a cost-effective solution to the student debt crisis, and it is imperative that we make it permanent.” 

SHRM supports the legislation, saying it incentivizes employees to take advantage of employer-funded education and loan repayment opportunities without the concern of a tax penalty for doing so. Employers benefit, as well, because their contributions to employees are generally deductible as a business expense, SHRM said.

Emily M. Dickens, SHRM chief of staff, head of government affairs, and corporate secretary, said that SHRM has “long championed policies that allow employers to offer education assistance programs that meet the needs of today’s workforce.”

“This legislation would benefit millions of Americans who are struggling with student loan debt, while simultaneously providing employers with a strategic advantage in attracting and retaining top talent in a competitive job market,” Dickens said.

SHRM is preparing to launch a campaign encouraging its members to contact their senators and representatives to urge them to co-sponsor the Employer Participation in Repayment Act.

More employers have offered student loan benefits over the past several years, buoyed by the soaring cost of student debt and the stress it is causing employees. National student loan debt currently stands at roughly $1.75 trillion, according to the Federal Reserve, and the average person leaves school more than $37,000 in arrears.

Bankrate reported that some 43 million U.S. residents have student loan debt, with research finding that student loan debt is often among the top financial stressors for workers.

According to the 2024 SHRM Employee Benefits Survey, 9% of employers offer student loan benefits, up from 8% in 2023.

Employers including Adidas, Aetna, Estée Lauder, and Staples offer contributions to paying off workers’ principal debt amounts, with many industry insiders predicting others will follow. Attraction and retention gains, as well as employee enthusiasm for the offering, are the motivators for offering the benefit: An American Student Assistance survey found that 86% of employees would commit to a company for five years if the employer helped pay back their student loans.

For additional guidance, see the IRS’ frequently asked questions on educational assistance programs.